FTSE drops as outcome of central bank meetings awaited

Wed, 1st May 2013

The top share index in the UK fell on Tuesday as cagey investors anxiously awaited the outcome of both the Federal Reserve meeting in the US plus the European Central Bank. By the close of the second session of the week, the FTSE 100 was lower by 0.43 per cent, tumbling to 6430.

Yet more data came across the Atlantic from the US, once again fuelling fears that the economic revival could be going into reverse. The Chicago Purchasing Managers Index, one of the key indicators in the US, tumbled to 49.0, the lowest result in three and a half years. Experts had predicted a small increase to 52.5, up from 52.4 during the previous month. Any number less than 50 indicates contraction rather than growth so fears have been triggered regarding the economic health of the region.

In the meantime, the outcome of the two day Federal Reserve summit was awaited, with the quantitative easing programme predicted to be left unchanged following a recent run of poor results in the US.

In the Eurozone, the ECB meeting was also being eagerly anticipated, with many expecting a slash of at least 0.25 percentage points in the interest rate. However, this is far from a certainty and as markets have already priced it in, any failure to act by the ECB could spark a sell-off on Thursday.

On the leaderboard, RBS was top of the shares, increasing by 4.18 per cent ahead of its interim trading update due to be announced on Friday. There was also a good response to Lloyds following its return to profitability, with the bank higher by 1.55 per cent.

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